Mandatory Filing for U.S. Persons with Interests in Foreign Business Enterprises

A new change in reporting requirements imposes a non-tax filing obligation on “U.S. Reporters” with interests outside the U.S. The BE-10 report is one of several surveys used by the U.S. Bureau of Economic Analysis (BEA) to collect information about inbound and outbound foreign investment under the International Investment and Trade in Services Survey Act. The BE-10 report is conducted every five years, but, unlike prior years, is mandatory with respect to the 2014 fiscal year.

All U.S. Reporters (both individuals and entities) who directly or indirectly owned or controlled a 10% or greater interest in a foreign business enterprise in the 2014 fiscal year are required to file a BE-10 report. The definition of foreign business enterprise is very broad and includes any foreign organization, foreign association, foreign branch, or foreign venture which exists for profit-making purposes or to otherwise secure economic advantage, and any ownership of any foreign real estate. As this is a non-tax filing obligation, the tax classification of the foreign enterprise is irrelevant—i.e., if the foreign entity is classified as a disregarded entity for U.S. federal income tax purposes, the BE-10 report will still be required if the applicable ownership thresholds are met. As to what needs to be filed, the BE-10 report will generally consist of a Form BE-10A and one or more additional forms (Form BE-10B, Form BE-10C, and/or Form BE-10D). With respect to a given foreign business enterprise, the extent to which Form BE-10A must be filled out, and whether Form BE-10B, Form BE-10C, or Form BE-10D must be completed, generally depend on the financial size of such foreign business enterprise. The various forms and instructions are available on the BEA website at https://bea.gov/surveys/respondent_be10.htm.

The filing may be submitted online or by mail. The general deadline for filing a BE-10 report depends on how many forms the U.S. Reporter will file. If the U.S. Reporter files less than 50 forms, then the filing deadline was May 29, 2015. If the U.S. Reporter files 50 or more forms, then the filing deadline is June 30, 2015. The filing deadline for new filers is June 30, 2015. A U.S. Reporter may obtain an extension to file the BE-10 report by filing a request with the BEA by the original filing deadline.

Jim Duggan, JD DUGGAN BERTSCH Attorneys & Counselors at Law

Penalties for failure to file the BE-10 report include civil penalties ranging from $2,500 to $25,000, in addition to injuctive relief to compel the completion and filing of the requisite forms. Moreover, individuals who willfully fail to report, as well as officers, directors, and employees who participate in a willful violation may be subject to imprisonment for up to one year and fined up to $10,000.

We recommend that you promptly consult your advisors regarding your interests in foreign business enterprises and the above non-tax file obligation. We will be happy to provide guidance or assistance at your request.

James M. Duggan is a principal of DUGGAN BERTSCH, LLC, a Chicago-based business, tax, estate and wealth planning firm comprised of attorneys and accountants. Jim’s practice has concentrated principally on business and corporate law, and estate and wealth planning, primarily as they relate to closely held business interests and high net worth families. Jim’s experience in the structuring and implementation of Family Offices, sophisticated tax planning, and asset protection planning strategies is nationally recognized, as is his role in the firm’s development of a leading multidisciplinary planning protocol. In addition to giving frequent lectures and authoring articles in his areas of concentration, Jim also serves as a director on numerous for-profit and not-for-profit organizations. Jim’s educational background includes attaining a Bachelor of Science in Marketing from the College of Commerce and Business Administration at the University of Illinois at Urbana-Champaign (Magna Cum Laude - 1991), a Masters in Business Administration in Finance from the DePaul University Graduate School of Business (Summa Cum Laude - 1994), and a Juris Doctor from the DePaul University College of Law - 1994, where he was awarded positions on both the DePaul Law Review and DePaul Business Law Journal.